The Government Accountability Office (GAO) is now recommending that in order to reduce crop insurance program costs, "Congress should consider limiting premium subsidies for individual farmers, reducing subsidies for all farmers, or both."
The recommendation is part of a GAO report on federal crop insurance.
What GAO Found
If a limit of $40,000 had been applied to individual farmers’ crop insurance premium subsidies, as it is for other farm programs, the federal government would have saved up to $1 billion in crop insurance program costs in 2011, according to GAO’s analysis of U.S. Department of Agriculture (USDA) data.
GAO selected $40,000 as an example of a potential subsidy limit because it is the limit for direct payments, which provide fixed annual payments to farmers based on a farm’s crop production history. Had such a limit been applied in 2011, it would have affected up to 3.9 percent of all participating farmers, who accounted for about one-third of all premium subsidies and were primarily associated with large farms.
For example, one of these farmers insured crops in eight counties and received about $1.3 million in premium subsidies. Had premium subsidies been reduced by 10 percentage points for all farmers participating in the program, as recent studies have proposed, the federal government would have saved about $1.2 billion in 2011. A decision to limit or reduce premium subsidies raises other considerations, such as the potential effect on the financial condition of large farms and on program participation.
National Crop Insurance Services Inc. (NCIS) fears the GAO measures would "adversely affect many of America’s full-time farmers" as well "prove particularly punishing to beginning and young farmers" who struggle to find operating loans without insurance coverage. The organization emphasized the public-private partnership designed to deliver crop insurance, which was done in a way to limit taxpayer risk exposure by shifting much of it to private business
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Jamie Wasemiller of the Gulke Group, says crop insurance is extremely helpful in managing the risks associated with crop production. Listen in as he provides insight for future insurance decisions.